S.B. 44, as amended by the House Committee of the Whole,
would enact four new income tax credits for all years beginning
with tax year 1998. The bill also would allow taxpayers to
establish education savings accounts and would amend a statute
to require certain adjustments to income by other state tax
agencies be reported to the Department of Revenue.

Income Tax Credits

Individuals certificated to instruct and educate K-12 students
in accredited schools would be able to claim refundable
credits of up to $125 for expenditures associated with the
costs of equipment, materials, or other teaching aids for use
in the classroom. Individuals claiming such credits could not
also claim deductions pursuant to K.S.A. 79-32,117.

Individuals with dependents attending certain elementary or
secondary schools in Kansas would be able to claim refundable credits for certain education expenses exclusive of
tuition. The schools would have to adhere to the provisions
of the federal Civil Rights Act of 1964 and the Kansas Act
Against Discrimination and be able to satisfy the attendance
requirements of K.S.A. 72-1111. The credit would be equal
to 25 percent of amounts paid for education expenses in
excess of $250, but in no case could the amount of credit
claimed exceed $300.

Members of agricultural cooperatives could claim a credit
equal to 10 percent of direct investments in the entities,
except that a credit could not exceed $500 in any taxable
year. Although the credits would be nonrefundable, they
could be carried forward for up to four years.

Certain individuals could receive refundable credits (of up to
$500 per dependent) equal to amounts paid for tuition,
textbooks, and fees at Kansas public postsecondary institutions and Kansas accredited independent colleges and
universities. The credits would not be available to married
taxpayers filing jointly with Kansas Adjusted Gross Income
(KAGI) of more than $80,000 and to other filers with KAGI of
more than $40,000.

Education Savings Accounts

Taxpayers would be allowed to establish postsecondary
education savings accounts beginning in tax year 1998 and
deposit up to $2,000 for the account holder and up to $1,000 for
each dependent child of the account holder, except that there
would be no limit on deposits from earned income of a dependent
child who is a recipient of Aid to Families with Dependent
Children. All income earned on postsecondary education savings
accounts would be exempt from the Kansas income tax. Taxpayers also would be allowed to subtract from their adjusted gross
income the first $2,000 of contributions to such accounts for all
tax years beginning in 1998.

Adjustments to Income

Another provision would amend K.S.A. 79-3230 to require
taxpayers to report adjustments to income made by other state
tax agencies. (Current law requires such adjustments to be
reported only when they have been made by the IRS.)

Background

S.B. 44, as amended by the Senate Assessment and Taxation
Committee and adopted by the Senate in 1997, would have
exempted remodeling labor services from the sales tax. The
House Committee removed the sales tax provision and inserted
the income tax credit provisions described in (1), (2), and (3),
above.

The House Committee of the Whole added the provisions
relating to income tax credits for tuition, textbooks, and fees;
education savings accounts; and adjustments to income.

The income tax credits described in (1) and (2) above are
similar to provisions contained in H.B. 2755 by Representative
Landwehr and others, except that the amount of both credits has
been changed and tuition expenses have been specifically
excluded from the education expenses credit. An oral fiscal note
presented in Committee by the Department of Revenue indicated
a reduction in State General Fund receipts attributable to the
provisions of the credits described in (1) and (2) above of
approximately $5 million to $6 million. Subsequent information
provided by the Department suggested the fiscal note for out-of-pocket expenses of teachers would be $4.1 million and the fiscal
note for the education expenses credit would be $1.2 million.

The Department of Revenue believes the income tax credits
described in (4) above would reduce State General Fund receipts
by $45 million. The education savings accounts provision,
recommended by the Governor, would reduce FY 1999 receipts by
$1.4 million and FY 2000 receipts by $2.0 million.

The credit for investments in agricultural cooperatives is
similar to H.B. 2481, with the changes suggested by proponents.
The fiscal note for credits attributable to such investments is
indeterminate.

The total FY 1999 fiscal note for the provisions with identifiable impacts would be a reduction in receipts of $51.7 million.

1. *Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.ink.org/public/legislative/fulltext-bill.html.